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Consider this before starting a holiday-letting venture

Category Property Advice

Cape Town is South Africa's most popular tourist hotspot - both inland and international tourists flock here for the remarkable natural attractions and exceptional hospitality. Each year, the Mother City witnesses more tourists than any other province in the country and this trend looks set to continue. For these reasons and more, investments in Cape Town's holiday-letting sector is booming as more savvy homeowners invest in homes to let out for holiday purposes. 

With the festive season fast approaching, a growing number of homeowners in Cape Town are establishing their own holiday-letting venture by either purchasing a new home or letting out a secondary one. If this sounds like a business you're interested in, read on as we will discuss four ways to make your holiday-letting experience in the city fruitful and long-term. 

Location
When choosing a location to buy a holiday home, do your research about the type of places holidaymakers are interested in. For example; in Cape Town, most people want a home that overlooks sweeping sea-views such as those in Clifton and Bantry Bay. For this reason, holiday homes by the sea rarely remain vacant, especially during peak-seasons. However, buying a holiday home on Cape Town's coast may be too expensive for many homeowners as these properties are priced well-over R5mil. The good news is Cape Town's immense tourism market attracts all types of people including those who require affordable rental rates. The homes away from the beach are sought-after for various other reasons such as its affordability, and close proximity to restaurants, animal parks, hiking routes, the city centre and other attractions such as Long Street, Signal Hill, Lion's Head and Table Mountain. 

Lock-up-and-go
Lock-up-and-go holiday homes are the most popular type of property for tourists not just in Cape Town but the wider South Africa as well. These are sectional-titles such as estates, apartments, and complexes. Lock-up-and-go homes tick all the right boxes for tourists as it is safe and convenient. And for homeowners, it is easy to maintain as the Body Corporate takes care of the upkeep, maintenance and repairs. Cape Town has a wide selection of these properties and homebuyers can invest in one or two-bedroom units that are perfect for couples, or four and six-bedroom units that are ideal for families or groups of friends. 

Tip: Before you buy a home in a sectional-title, ensure that you're allowed to let it out for holiday purposes and check that it has effective management in place, a healthy track record and sound financial records. Furthermore, inquire about the rates, taxes and levies that you're required to pay each month.

Pricing
When it comes to pricing, you will have to do market research and work out your costs before deciding on a rental price that is competitive and will fetch a good profit. Remember, your price will depend on: 
    - Location (Seaside homes are priced higher); 
    - Costs involved (Bond repayments, furniture and equipment, electricity, water, rates, taxes and levies etc.)
    - Size of your home (Number of bedrooms and sqm);
    - Type of property (Apartment, estate, freestanding etc); 
    - Unique or sought-after features in the home or onsite and; 
    - Whether it is new or has been recently upgraded. 

On average, if you invest in a holiday home in Cape Town's Atlantic Seaboard, your rentals can be anywhere from R6,000-R30,000 a night (during peak season). While, the plushest homes on this coastal belt have been known to fetch a staggering, R110,000 - R130,000 a night. 

Protection
Investing in a holiday home is an exciting venture that can bring in healthy profits. But it is important to keep in mind that you are opening your home and its belongings to strangers. Therefore, you need to protect it from theft and potential damage through a homeowners insurance policy as well as a holiday lease agreement. The agreement outlines the deposit and payment terms, cancellations, breakages and complaints policies. In this way, the rights and responsibilities of both parties are clear and legally binding. Both the policy and agreement provide protection for homeowners against damage, destruction, noise or other issues which may arise. 

If investing in a holiday home in Cape Town or letting out your property as a holiday home sounds like your next exciting venture, speak to Knight Frank today. 

Author: Knight Frank

Submitted 09 Oct 19 / Views 84

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